[4830-01-u]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[DL-40-95]
RIN 1545-AT48
Disclosure of Returns and Return Information to Procure
Property or Services for Tax Administration Purposes
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: These proposed regulations relate to the
disclosure of returns and return information in connection
with the procurement of property and services for tax
administration purposes. The amendments would authorize the
Department of Justice, including offices of United States
Attorneys, to make such disclosures. Current disclosure
authority within the Department of Justice rests only with
the Tax Division. The amendments also reflect a change to
the law made by the Omnibus Budget Reconciliation Act of
1990 regarding the type of services about which disclosures
may be made.
DATES: Comments and requests for a public hearing must be
received by March 14, 1996.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (DL-40-95),
room 5228, Internal Revenue Service, POB 7604, Ben Franklin
Station, Washington, DC 20044. In the alternative,
submissions may be hand delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R (DL-40-95), Courier's
Desk, Internal Revenue Service, 1111 Constitution Avenue
N.W., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Donald Squires, 202-622-
4570 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 6103(n) of the Internal Revenue Code (Code)
authorizes the disclosure of returns and return information,
pursuant to regulations prescribed by the Secretary of the
Treasury, "to the extent necessary in connection with the
processing, storage, transmission, and reproduction of such
returns and return information, the programming,
maintenance, repair, testing, and procurement of equipment,
and the providing of other services, for purposes of tax
administration."
Existing regulations promulgated under this section
prescribe the persons who may make such disclosures, the
situations under which such disclosures may be made and the
notification and safeguarding procedures to be followed when
such disclosures are made. Among the persons who may make
such disclosures are officers and employees of the Tax
Division of the Department of Justice. The amendments would
authorize such disclosures by the Department of Justice (not
solely the Tax Division) to third parties who provide
services for tax administration purposes under the
conditions and restrictions of the regulations. The
amendments would provide that, for the purpose of this
section, the "Department of Justice" includes offices of
United States Attorneys.
The amendments would also conform the regulation to the
language of section 6103(n), which was amended by the
Omnibus Budget Reconciliation Act of 1990 to clarify that
the disclosures authorized by this section included those in
connection with "the providing of other services" (i.e.,
services other than those related to the mechanical
processing of returns and return information).
Explanation of Provisions
As currently written, 26 CFR 301.6103(n)-1 authorizes
the Tax Division of the Department of Justice, among other
entities and individuals, to make disclosures of returns and
return information pursuant to section 6103(n) of the
Internal Revenue Code. This authority allows the Tax
Division to disclose tax information incident to its
contracts to private parties for, among other purposes,
automated litigation support services.
The Department of Justice has indicated its intention
to establish an expanded automated tracking system for all
monetary judgments in favor of the United States, which will
be operated by a private company under contract with the
Department. Although the majority of tax cases are handled
by the Tax Division, there are several United States
Attorneys' offices that also have litigation responsibility
in the civil tax area. In addition, the Tax Division refers
some judgments in tax cases to the United States Attorneys
for collection. Existing regulations arguably would not
permit these offices, which are technically not part of the
Tax Division, to disclose tax information incident to their
inclusion of tax judgments in the automated tracking system.
The proposed amendment would authorize the Department
of Justice, including offices of United States Attorneys, to
make disclosures to procure property and services for tax
administration purposes. Any such disclosures will be made
under the same conditions and restrictions already set forth
in the existing regulations. By definition, any office
within the Department of Justice without tax administration
duties will not have occasion or authority pursuant to these
regulations to make such disclosures.
The proposed amendment would also authorize disclosures
in connection with "the providing of other services," i.e.,
services not related to the strict mechanical processing or
manipulation of tax returns or return information. This
would conform the regulations to the language of the
statute, as amended by the Omnibus Budget Reconciliation Act
of 1990 (P.L. 101-508, 104 Stat. 1388-353).
Special Analyses
It has been determined that this notice of proposed
rulemaking is not a significant regulatory action as defined
in EO 12866. Therefore, a regulatory assessment is not
required. It has also been determined that section 553(b)
of the Administrative Procedure Act (5 U.S.C. chapter 5) and
the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not
apply to these regulations, and, therefore, a Regulatory
Flexibility Analysis is not required. Pursuant to section
7805(f) of the Internal Revenue Code, this notice of
proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for
comment on its impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final
regulations, consideration will be given to any written
comments that are submitted timely (preferably a signed
original and eight copies) to the IRS. All comments will be
available for public inspection and copying. A public
hearing may be scheduled if requested in writing by any
person that timely submits written comments. If a public
hearing is scheduled, notice of the date, time, and place
for the hearing will be published in the Federal Register.
Drafting Information
The principal author of these proposed regulations is
Donald Squires, Office of the Assistant Chief Counsel
(Disclosure Litigation), IRS. However, other personnel from
the IRS, Department of Justice and Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift
taxes, Income taxes, Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended
as follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Para. 2. Section 301.6103(n)-1 is amended as follows:
1. The first sentence of paragraph (a) introductory
text is amended by removing the language "Tax Division,".
2. Paragraph (a)(2) is amended by removing the
language "or to".
3. Paragraph (a)(2) is further amended by adding the
language "or the providing of other services," immediately
following the text "other property,".
4. The concluding text following paragraph (a)(2) is
amended by removing the language "Tax Division,".
5. The second sentence of paragraph (d) is amended by
removing the language "Tax Division,".
6. Paragraph (d)(2) is amended by removing the
language "Tax Division,".
7. Paragraph (e)(1) is amended by removing the
language ", and" at the end of the paragraph and adding a
semicolon in its place.
8. Paragraph (e)(2) is amended by removing the period
at the end of the paragraph and adding "; and" in its place.
9. Paragraph (e)(3) is added.
10. The authority citation immediately following
301.6103(n) is removed.
The addition reads as follows:
301.6103(n)-1 Disclosure of returns and return information
in connection with procurement of property and services for
tax administration purposes.
* * * * *
(e) * * *
(3) The term Department of Justice includes offices of
the United States Attorneys.
Margaret Milner Richardson,
Commissioner of Internal Revenue